Real estate market analysis: What it is & How to do it

A real estate market analysis is a tool that helps us to gather information to know, for example, if we should invest in a property or to determine the rental potential of a city or district. In fact, it would be crazy to buy a property without having information to support a purchase of this size.

Market research is the preliminary step that every investor must take before jumping into the market. The objective is to be sure that the project is viable and that it fits in the existing market.

Not all real estate investors are patient enough to competently conduct a real estate market analysis. If you want your real estate business to stand out from the competition, you need to do some research. So, what is a market study in real estate?

What is a real estate market analysis?

A real estate market analysis, also known as a comparative market analysis, is an analysis of current market values of properties, comparable to a property you are looking to buy or sell.

A real estate market analysis should always be done, whether buying or selling a property, as it will help to understand the current market, how much similar properties are worth, if it is an investment property, how much you can charge for rent, etc.

Real estate agents and brokers create reports to help sellers set list prices for their homes and, less frequently, to help buyers make competitive offers.

The information gathered through a real estate market survey helps the seller choose a listing price and helps buyers see if the asking price is too high, low or reasonable.

Why do a real estate market analysis?

There are several reasons to do this type of study, the main one is to have information that allows you to invest and buy safely. Other reasons also include:

  • To know if you should invest in one city instead of another.
  • To identify which elements hinder investment in certain places.
  • To know demographic aspects to determine the evolution of the area where you want to invest.
  • To have information about investment projects in certain areas and to know if in the future they will have a development that will increase the value of the properties.

By knowing the housing market prices, you will always have the opportunity to negotiate a lower price and avoid overpaying the market value of a property.

Tips for conducting an effective real estate market survey

Before starting to collect information, it is necessary to clearly define the market in which you are going to position yourself: type of products or services offered, type of market (individuals, companies, administrations, etc.), target geographic area, etc. 

A well-defined market is an essential starting point for conducting a relevant study. 

  • Property analysis: To conduct a real estate market analysis is to perform a property analysis. The area and neighborhood, lot size, construction time, services and amenities, etc. should be evaluated.
  • Evaluate the original price: Once you have performed the property analysis, search online for the original listing, if possible. This will give you a good idea of the overall condition of the home. Review the photos and descriptions for any updates, remodeling or potential problems.
  • Verify property value estimates: Use online resources to give you the estimated market value of the home. Since these are market value estimates, they may not be totally accurate, especially if changes have been made to the home. But this will provide a good starting number to continue your real estate market research.
  • Comparisons: Make a comparison of the property with others in the same area, aspects such as size, price and other elements will help you determine the value.
  • Decide the market value: According to all your research, you should have a price range for the value of your property. Take into account everything you have observed and analyzed and how it will affect the value.

To conduct a study you can choose between two solutions: do market research on your own, or hire someone. 

Steps to conduct a real estate market analysis

You need to take a structured and organized approach when conducting real estate market research. To do this, you can segment your analysis around these four axes: market, demand, supply and environment, and then you have to ask the right questions. 

steps to create a real estate market analysis

The objective is clear: to analyze the market potential and validate the commercial viability of your project.

Step 1: the study of the market and its evolution

As a first step, it is important to be informed about the market in a global way. The objective is to improve knowledge in this field: market volume, trends, likely evolution. 

Here is an example of a list of questions to ask when studying the market and its likely evolution:

  • What is the volume of the market? In particular, in terms of turnover, customers, quantity sold?
  • How is the market doing now? 
  • What are its prospects for the coming years? A market may be growing or stagnating.
  • What are the current market trends?
  • What products or services are available in the market?
  • Who are your direct or indirect competitors? What do they offer? What are the commonalities and differences between what the competition offers and your range of products/services?
  • What are your terms and conditions of sale? 
  • Who are my potential suppliers and what terms and conditions can they offer me?

These questions will allow you to develop your knowledge of the market situation and the players involved.

We recommend you check this guide to conduct a market survey.

Step 2: Studying the demand

By studying the demand, the objective is to know the customers in the market and to evaluate if there is potential to be exploited. Here is an example of a list of questions to ask when considering demand in a real estate market survey:

  • How many customers are there in this market? How is this number changing (increasing, decreasing, stagnant)?
  • Who exactly are these real estate customers? Where are they located?
  • What is the consumption rate of the customers? How do they behave? 
  • What are the consumer’s choice criteria? What is their budget? What are the important points to trigger a purchase? 

Step 3: Studying of the offer

The analysis of the offer consists of studying in detail what your competitors already offer in the market. Here is an example of a list of questions to consider the offer:

  • Who are the competitors in the market? 
  • Which companies have the largest market shares? 
  • What is the size of the main competitors? Where are they located and how do they choose their locations? 
  • How long have they been around and what is their financial health? 
  • What criteria do some competitors use to succeed better than others?

An in-depth study of your competitors’ offerings can help you identify opportunities to prepare your future offerings and gain competitive advantages. 

Through a real estate market analysis you will have a better understanding of what works, the essential criteria for success, and also what has not worked.

Step 4: the environmental and legal study

The environmental study consists of analyzing the factors that may influence the market, such as applicable regulations, technological developments or any other element that may have an influence.

Here is an example of a list of questions to ask when studying the environment:

  • What innovations are affecting the market? 
  • What is the regulatory framework governing the market? 
  • Are there laws specific to this market? 
  • What are the trends in the evolution of legislation?
  • Are there professional groups or other actors acting or influencing the market?

Step 5: Data collection process

The data collection process is one of the most important steps in conducting real estate market research, as it allows you to gather information that will help you determine if the project is viable and your investment is secure. 

QuestionPro allows you to easily conduct your field research to get the data you need. It doesn’t matter if you don’t have Internet, our Offline App allows you to conduct surveys through mobile devices and download the information once you have a wifi connection. 

Conduct real estate surveys and start getting the information you need to secure your investment in the real estate market. 

Step 6: Reporting the results

Presenting a report with the information obtained will allow investors to perform an analysis and determine the best strategies to secure the investment. 

Our survey software allows you to visualize the collected data in real time, which helps you to pre-analyze the information and prepare a report where you highlight what is relevant and stakeholders can visualize it and make better decisions. 

Start standing out in the real estate industry by making the right decisions with the help of data! 

If you are thinking of conducting real estate market research, we can help you.

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